10-QPeriod: Q1 FY2009

Arthur J. Gallagher & Co. Quarterly Report for Q1 Ended Mar 31, 2009

Filed May 1, 2009For Securities:AJG

Summary

Arthur J. Gallagher & Co. (AJG) reported a net loss of $(6.0) million, or $(0.07) per diluted share, for the first quarter of 2008, compared to a net earning of $26.4 million, or $0.27 per diluted share, for the first quarter of 2009. This significant turnaround was driven by a substantial reduction in losses from discontinued operations and improved earnings from continuing operations. For the first quarter of 2009, total revenues increased to $401.1 million from $375.8 million in the prior year. Earnings from continuing operations before income taxes saw a notable rise to $43.5 million from $26.9 million. The company's Brokerage segment demonstrated strong revenue growth, while the Risk Management segment remained stable. The Financial Services and Corporate segment experienced a loss. The company maintained its quarterly dividend of $0.32 per share.

Key Highlights

  • 1Arthur J. Gallagher & Co. reported a net profit of $26.4 million for Q1 2009, a significant improvement from a net loss of $6.0 million in Q1 2008.
  • 2Total revenues increased by 6.8% to $401.1 million in Q1 2009 compared to $375.8 million in Q1 2008.
  • 3Earnings from continuing operations before income taxes increased by 61.7% to $43.5 million.
  • 4The Brokerage segment saw a 12% increase in total revenues to $289.5 million, driven by acquisitions and new business, though organic growth was slightly negative.
  • 5The Risk Management segment's revenues remained relatively flat at $112.2 million, with a slight organic growth of 1.2% in fees.
  • 6The company declared and paid a quarterly dividend of $0.32 per common share for both Q1 2009 and Q1 2008.
  • 7The company utilized $222.0 million in borrowings under its Credit Agreement as of March 31, 2009, with $214.4 million remaining available.

Frequently Asked Questions

Arthur J. Gallagher & Co. showed a significant improvement in its financial performance. The company reported a net earning of $26.4 million for the first quarter of 2009, a substantial turnaround from a net loss of $6.0 million in the first quarter of 2008. This was driven by increased revenues and improved earnings from continuing operations, alongside a reduction in losses from discontinued operations.

The Brokerage segment experienced strong revenue growth of 12% to $289.5 million, fueled by recent acquisitions and new business, although organic growth in commissions and fees was slightly negative (-1.4%). The Risk Management segment's revenues were relatively stable at $112.2 million, with a modest organic growth of 1.2% in fees. The Financial Services and Corporate segment incurred a loss from continuing operations before income taxes of $10.0 million.

Arthur J. Gallagher & Co. maintained its quarterly dividend at $0.32 per common share for both Q1 2009 and Q1 2008. During the first quarter of 2009, the company did not actively repurchase shares under its announced plan, but shares were repurchased to cover employee tax withholding obligations. The company has an authorized repurchase program with capacity for approximately 10.0 million additional shares.

As of March 31, 2009, the company had $192.5 million in cash and cash equivalents. It had $400.0 million in borrowings under its Note Purchase Agreement and $222.0 million outstanding under its Credit Agreement, with $214.4 million remaining available under the Credit Agreement. Management believes the company has adequate resources to meet its foreseeable liquidity needs, although it acknowledges potential challenges in the current credit markets.